The quality and quantity of housing have been serious problems for many years. Most housing was owned by the state, and rents were controlled. In the mid-1980s, new apartments rented for about one GDR mark per square meter; older units rented for even less. East Germany, however, has suffered from a shortage of housing. Construction was accorded low priority in the 1950s and early 1960s; hence older housing was allowed to fall into disrepair, and few attempts were made to modernize apartments. Even as late as the early 1970s, close to 80 percent of dwelling units were of prewar vintage. More than half had no indoor plumbing.

During the 1960s, authorities began to recognize the need for housing construction, but little attention was given to design or comfort; the government was primarily interested in cutting construction time and costs. Housing was given top priority at the eighth and ninth party congresses, and since the early 1970s the construction of new housing and the renovation of older dwellings have formed the main thrust of East Germany's social policy. The shift in emphasis is apparent in the number of new dwellings constructed annually. In 1950 only 31,000 new units were built; in 1960 the number had risen to 80,000. Since 1971, however, over 100,000 new or improved units have been constructed each year. From 1980 to 1984, close to 946,000 new homes were constructed, and over 333,000 units were modernized. The 1986-90 Five-Year Plan called for construction and modernization of 1,064,000 units and committed the country to solving the housing problem by 1990.

Beginning in the 1970s, an attempt was also made to build more attractive and spacious housing. Prefabricated dwellings, popularized in the 1960s because of low cost and quick construction time, still formed the majority of new housing, but more attention was given to design and aesthetic qualities. All dwellings built after 1970 had indoor baths and showers, and most had hot water and central heating.

Despite the housing boom of the preceding decade, many problems remained as of the mid-1980s. The persistence of a housing shortage meant that allocation of housing created a measure of discontent. Housing, particularly in the large urban areas, was difficult to obtain, and young couples looking for their first home were often forced to wait two or three years before a unit became available. Housing was assigned on the local level by housing commissions. Priority was generally accorded first to families with children, then to married couples, and finally to single persons. Because of the housing problems, moving from one city to another could be a frustrating experience. Available housing was advertised in newspapers and listed with local authorities. A family then attempted to match its requirements with those of a family in another city and exchange units. Housing, however, has been used to entice workers into certain jobs or sectors of the economy and to reward loyal service to the state; therefore, highly skilled workers and members of the technical intelligentsia and political elite have been given preference in assignments and receive the choicest housing.